Question

Use the following information to calculate cash paid for income taxes: Income tax expense $ 58,000 Income tax payable, January 1 13,600 Income tax payable, December 31 16,200

Answer 1

Answer:

Calculation of Cash Paid:

Income tax payable, January 1      $ 13,600

Income tax expense                        58,000

Total amount due                            71,600

Income tax payable, December 31  16,200

Cash Paid                                     $ 55,400

Explanation:

The Income tax payable on January 1 is added to the income tax expense for the year to obtain the amount that is due for payment this year, and then the December 31 Income tax payable is deducted to get the cash paid during the year.  This arrangement can be reversed in its proper and normal order thus:

Income tax payable, January 1      $ 13,600

Income tax expense                        58,000

Total amount due                            71,600

Cash Paid                                         55,400

Income tax payable, December 31  16,200